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The federal government has introduced legislation to implement the rescission of the Digital Services Tax Act ("DST"). The DST was a gross revenue tax or transaction tax targeted at revenues derived by large digital businesses, including revenues from online advertising services, receipts from digital intermediary activities such as online marketplaces, and sales of user-collected data. The details of the DST were discussed in "Budget 2021: Canada's COVID-19 recovery budget" and "Is your business ready for Canada's Digital Services Tax?"
Tucked into the government's bill implementing certain provisions of Budget 2025 (Bill C-15) is legislation that would repeal the DST and its regulations with retroactive effect to June 20, 2024.
Once enacted, Bill C-15 will eliminate any DST liability that accrued since the tax came into force on June 28, 2024. This is a welcome development for impacted taxpayers, as the precise legal mechanism and timing of the DST's repeal had been uncertain until now.
Notably, the government's initial announcement of its intention to rescind the DST on June 29, 2025, came only hours before taxpayers' first payments were due. As a result, certain taxpayers had already paid amounts to the Canada Revenue Agency ("CRA") in respect of their anticipated DST liabilities. Bill C-15 helpfully confirms that such amounts will be refunded, with interest.
The repealing legislation provides that any payment which (absent the repeal) would have been treated as a payment of DST must be refunded with interest calculated from the date of receipt through to the date the refund is issued. Interest will be paid at a statutory refund rate calculated quarterly based on the simple average yield of three-month Canadian Treasury bills for the first month of the preceding quarter, rounded up to the nearest whole percentage point. The CRA has calculated the rates for 2025 as follows:
- Q1 2025: 4%
- Q2 2025: 4%
- Q3 2025: 3%
- Q4 2025: 3%
Although legislative certainty is welcome, it is unfortunate that taxpayers who paid their DST promptly must now deal with the administrative burden of refunds and are limited to a relatively low return on potentially large payments of tax that they ultimately never legally owed.
Taxpayers should continue to monitor the progress of Bill C-15 as the DST's repeal will not take effect unless and until it receives Royal Assent. In addition, taxpayers should pay close attention to any guidance from the CRA regarding the timing of DST refunds. If, instead of a refund, taxpayers request that the amount be applied against other taxes owing (such as income tax or GST/HST), they will need to work closely with the CRA to ensure the amount is processed properly.
Read the original article on GowlingWLG.com
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